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Franklin (BEN) Displays Prudent Cost Management: Time to Buy?

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On May 6, we issued an updated research report on Franklin Resources (BEN - Free Report) . The company has been benefiting from expense management and strong diversification strategies. However, declining investment management fees and strict regulatory environment remain near-term concerns for the company.

In second-quarter fiscal 2019 (ended Mar 31), Franklin reported positive earnings surprise of 12.5%, outpacing the Zacks Consensus Estimate. However, the figure declined on a year-over-year basis. The results reflected controlled expenses, lower revenues and reduced assets under management (AUM).

The company’s earnings estimates for fiscal 2019 and 2020 have inched up 6.7% and 6.4%, respectively, in the last 30 days. As a result, the stock currently flaunts a Zacks Rank #1 (Strong Buy).

Franklin’s shares have gained 14.8% over the past three months compared with the industry’s growth of 11.3%.


 

Franklin exhibits impressive cost-control measures. Though the company recorded 2% rise in operating expenses in fiscal 2018 on potential investments in the technology, it recorded 7%, 14% and 3% decline in operating expenses in fiscals 2015, 2016 and 2017. In addition, in the first six months of fiscal 2019, a 2% drop in expenses was recorded. Notably, management expects 2-3% decline in expenses in the current fiscal.

Also, Franklin remains well poised to undertake inorganic growth strategies. In the last couple of years, the company has completed acquisitions that helped it improve and expand alternative investments and multi-asset solutions platforms. This, in turn, is likely to aid it in providing world-class investment solutions to clients.

Franklin remains committed on enhancing shareholders’ value. Notably, in April 2018, the company announced an additional repurchase authorization of up to 80 million shares. Moreover, driven by a healthy liquidity position, the company has hiked its dividend every year since its inception in 1981, the latest being the 13% increase last December. The company also paid a special cash dividend of $3 per share last April.

Other Stocks to Consider

T. Rowe Price Group, Inc. (TROW - Free Report) has been witnessing upward estimate revisions, for the past 30 days. Moreover, this Zacks #1 Ranked stock has rallied more than 14%, in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.

Artisan Partners Asset Management Inc. (APAM - Free Report) has been witnessing upward estimate revisions, for the past 30 days. Also, the company’s shares have gained nearly 13.6% in three months’ time. At present, it sports a Zacks Rank of 1.

Cohen & Steers Inc (CNS - Free Report) has been witnessing upward estimate revisions for the past 30 days. Additionally, the stock has jumped around 35.8% over the past three months. It currently flaunts a Zacks Rank #1.

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